Belarus alarmed by counterfeit alcohol flooding domestic market

Belarus alarmed by counterfeit alcohol flooding domestic market

The illegal trafficking of alcohol, increased imports and reduction in domestic production were central topics of the August 20 meeting hosted by the Belarus President. He criticized the hesitancy of the government in taking measures to protect the domestic market from low-quality products.

The production of alcoholic beverages is under state control all over the world. The reason is simple: alcohol is a special excise product. We all know that excessive drinking is harmful to health, but the simple ban is not an option. Therefore Belarusian authorities are promoting healthy lifestyle and advocate for improving the culture of drinking. Then it is up to an individual to choose how much to drink. The alcohol industry is operating and there are a lot of issues to resolve. This is why a meeting was hosted by the Belarusian head of state on August 20.

Alexander Lukashenko:
On July 1 this year a special decree and the decree of the President introduced additional security measures to strengthen state regulation in this sphere. The task was to prevent the deliveries of defective products to the domestic market, to reduce the illegal circulation of alcoholic beverages. This means not only losses of the budget, but first and foremost a threat to the health and lives of people. However, we still see some negative trends. We register increased import of alcohol and more of it is involved in illegal. Domestic production is decreasing at the same time. Unfortunately, the government is behaving extremely hesitant in taking measures to protect the domestic market. It's no good.
Counterfeiting from the Russian Federation and other countries is crushing the country. Experts propose to introduce harsh responsibility for the supply of counterfeit products to Belarus, including the confiscation of vehicles carrying these counterfeit products.

Why does the President sounds the alarm? Over 6 months of 2015, law enforcement officers seized more than 500,000 liters of illegal alcohol. This is twice more than in the whole of 2014. Counterfeit comes mainly from Russia. 

The state's task is to restore order in this area, so people don't consume low-grade counterfeit. Moreover, why do it if today Belarusian enterprises produce high-quality products? But the demand for factory goods did fall. Manufacturers felt it.

Alexander Lukashenko:
Excise policy offered by the government almost ruined the industry, experts claim. Excise taxes have led to an increase in prices and because of counterfeiting reduced demand for these products and, hence, budget losses.
Private structures, thanks to their agility and I don't know what are other factors (you tell me), have taken 35% of the market, and we see unfair competition from them, including with the help of retail chains. Dictatorship of chains is unacceptable. It is already at an unacceptable level. Payments to suppliers of liqueurs and spirits are untimely. As I said, state-owned enterprises remain on the sidelines. State-owned enterprises are required to provide discounts for the sales of alcohol, sometimes up to 40% of the cost. And, as I said, there are strange bonuses for retail chains, of course, at the cost of the manufacturer.

The President calls on the government to adopt a strict and principled approach to retail chains. Alcohol industry should work not under the dictate of commercial networks but under the dictate of manufacturers.

In fact, it turns out that stores get bonuses for the promotion of goods on their shelves thus closing a lot of opportunities for domestic producers.  Sometimes it comes to ultimatums: retail chains agree to buy large consignments of alcoholic products only if the latter gives them a discount. Such approaches are a common sight in the Russian market.

Alexander Zabello, chairman of the concern Belgospischeprom:
Today, the principle of the distribution of goods is no longer valid. Indeed, we need to promote products. But what trade organizations are doing is sometimes a complete mess. The minimum selling price provides the zero level of profitability of a company because 70% of its price is the excise tax. But trade organizations, in addition to a source of gross income provided by law (markup) also get extra super-profits thanks to those bonuses. And they bear no responsibility. If there is excess in profitability in the alcohol industry, it should be taken away in the form of excise to the country's budget and then redistributed for kindergartens and hospitals). But all this money was taken by distribution networks and used for their own purposes.         

However, the alcohol industry itself should work better. A record accounts receivable formed at the beginning of 2015 - retail chains had debts to factories amounting to more than 500 billion Belarusian rubles. Accounts receivable are gradually falling. If the situation does not improve in the coming months factories may have their licenses revoked. Everything is serious and this issue is under the control of the State Security Committee.

Mikhail Rusyi, Deputy Prime Minister of the Republic of Belarus:
The head of state set a task: trade organizations must pay to their suppliers until September 1. No installments are allowed.

Capacities for the production of alcohol in Belarus are twice larger than the domestic demand. Alcohol is exported but it has recently become difficult to promote Belarusian products abroad. Demand in Russia and Ukraine fell. Thus stocks have accumulated. The Head of State required that products be on shelves and placed in such a way that people can easily see them. He gave organizations one month to deal with the issue. 

Mikhail Rusyi, Deputy Prime Minister of the Republic of Belarus:
The Head of State instructed to strictly consider the issues and deal with excise policy. We should examine how other states protect their markets.  

For better operation abroad, it had been decided to create a single alcohol holding. A month ago it was established at the site of the largest manufacturer of alcoholic beverages. The holding now includes 8 plants. In 2015, Belarus' export of alcohol should reach the level of 2014.

Stanislav Iodis, head of a holding for the production of alcoholic beverages:
We begin supplies to Syria, Lebanon and Turkey. Also, we are starting to work with Germany.    

Alexander Lukashenko emphasized that alcohol producers should work without intermediaries. Orders have been given to support the internal market - first of all to protect it from gray imports of alcohol. In the near future Belarus will review rules regarding the import and export of alcoholic beverages.